A year has passed since the deadly Hamas attack on October 7, 2023—an event that has fundamentally altered the trajectory of the Israeli-Palestinian conflict and shattered long-held assumptions. This surprise offensive, which left roughly 1,200 dead and rocked the nation to its core, exposed deep vulnerabilities in Israel’s military preparedness, intelligence apparatus, and broader strategic outlook. The conflict that has followed has significantly reshaped Israel’s standing in the region and its relationship with both allies and adversaries.

At a deeper level, the year since the attack has reaffirmed an essential truth: Israel must chart a new path forward. Its traditional reliance on military strength, Western support, and exploiting divisions among regional adversaries is no longer sufficient to ensure the country’s long-term security and prosperity. Instead, Israel must embrace a strategy centered on regional economic integration—one that aligns its interests with those of its neighbors, reduces tensions, and creates a framework for long-term stability.

Shifting Regional Dynamics and the Collapse of Old Foundations

Since its founding in 1948, Israel’s survival has relied on a trifecta of conditions: internal unity, external disunity, and unwavering Western support. Over the past year, each of these pillars has come under significant strain, revealing deep cracks that have only widened in the wake of the ongoing conflict.

The first pillar, internal unity, is essential to Israel’s resilience. The ability of Israeli society to remain cohesive in the face of external threats allowed it to leverage its limited resources effectively. However, political polarization and demographic changes have put this unity at risk. The increasing political influence of the ultra-Orthodox community, which often avoids military service and relies heavily on state support, has created economic and social tensions. Meanwhile, the country’s Arab-Israeli population is increasingly asserting itself politically, adding complexity to the national consensus. These divisions were evident before the current war began, as evidenced by the country’s still-simmering constitutional crisis, but the ongoing conflict has further exacerbated them. The Netanyahu government’s mishandling of the October 7 attack, its wartime strategy, and a host of other issues have resulted in mass protests and calls for new elections, revealing a society struggling to maintain cohesion even at a time of heightened external threat.

The second pillar, external disunity among Israel’s regional adversaries, has also weakened. In the past, Israel benefited from the rivalries and divisions between Arab states, which prevented a unified front against it. However, regional dynamics are changing. The Abraham Accords initially offered a path to greater integration with neighboring Arab states without addressing the Palestinian grievances. However, the Israel-Gaza War has jeopardized these relationships. Experts highlight that the war has not only paused but, in some cases, reversed the progress made under the accords. In addition to this, there is Iran and its long-standing rivalry with Israel over regional hegemony. Tehran remains committed to its goal of regional dominance, with its extensive proxy networks across Lebanon, Syria, and Yemen, and presents a more cohesive and formidable challenge than the fragmented Arab coalitions of the past.

Finally, the third pillar—Western support, particularly from the United States—has long been a cornerstone of Israeli security. Over the decades, billions of dollars in military aid and strong diplomatic backing allowed Israel to maintain a military advantage disproportionate to what its economy and size would otherwise allow. However, the war in Gaza has led to a notable erosion of support for Israel within key segments of American society, especially among younger Americans and segments of the political Left. The humanitarian impact of the war, the images of destruction in Gaza, and the rising civilian toll have led to growing criticism, including mass protests. The Biden administration itself has faced internal dissent, with staffers pushing for a shift in U.S. policy, reflecting broader changes in American attitudes toward Israel. Similar discontent and eroding support are apparent in European states as well. This shift threatens the long-term reliability of Western backing—a critical vulnerability for Israel.

The Need for Regional Integration: A New Strategic Imperative

Given the collapse of these foundational conditions, Israel must pursue a new strategy: regional economic integration. This approach, which aims to create interdependencies that foster peace and stability, offers Israel the best chance of securing its future in an increasingly uncertain world.

This vision is not entirely new. Israeli policymakers have long understood the need to diversify Israel’s alliances and reduce its dependence on Western powers. The Abraham Accords, which normalized relations with countries like the UAE and Bahrain, were a significant step in this direction. The goal was to build an economic partnership that would reduce political tensions and create mutual benefits. Ironically, it is Prime Minister Benjamin Netanyahu who kicked off this change after becoming finance minister in 2003 under then-Prime Minister Ariel Sharon, when he announced the Economic Recovery Plan. As economist Adam Tooze explains:

Netanyahu’s strategy was to make the modern segment of Israel’s economy so competitive that it would enable not just independence from American (or European) pressure, but turn Israel into a magnet for regional economic interests, above all of the Gulf…Developing better relations with the growing Arab economies of the region would allow an “economic peace” (one of Netanyahu’s favorite slogans)...

Yet, the events of the past year have highlighted the limitations of this approach, which does not resolve the Palestinian issue. The war has halted progress on regional integration not only because Arab states face domestic pressure to condemn Israeli actions in Gaza but also because they understand that seeking regional integration without solving the Palestinian state is a risky strategic discourse that will always be exploited by players such as Iran and its proxies. For instance, public opinion in countries like Saudi Arabia and Jordan remains staunchly supportive of the Palestinian cause, forcing their governments to distance themselves from Israel despite the economic incentives for cooperation.

Two Divergent Paths: Confrontation or Compromise

Israel now faces a critical choice between two starkly different paths. The first is continued confrontation, which could involve a grim scenario of forcibly expelling Palestinians from Gaza and possibly the West Bank. This approach would seek to end the Palestinian cause altogether. However, this option carries immense risks, including the potential for international condemnation, economic sanctions, the collapse of Jordan (with its impact on Saudi Arabia and the Gulf states more broadly), and even the end of the Camp David Accords with Egypt that has lasted for more than forty years. Moreover, it could ignite a wider regional confrontation involving Iran and its proxies—as we are seeing right now with increased fighting between Israel and Hezbollah in Lebanon. Despite these dangers, some Israeli leaders may see this as the only way to ensure long-term security, particularly as Western support appears increasingly uncertain.

The second option is a return to pursuing a two-state solution—a goal that has been discussed for decades but remains elusive. This would involve establishing a Palestinian state, potentially along the 1967 borders, with Gaza and the West Bank under the governance of the Palestinian Authority, potentially with international oversight. This approach may offer the only sustainable path toward regional stability. However, this approach faces significant hurdles, the greatest of which is that Israel’s leadership would have to cede its long-term objective of not allowing Palestinians to have their own state. Similarly, there would have to be collective Western-Arab support for rebuilding Palestinian infrastructure and, more importantly, a renewed commitment from both sides to negotiate in good faith.

The odds of meeting any of these preconditions are slim at the present moment. Hamas, though heavily degraded, remains deeply entrenched in Gaza and threatens to become an insurgency against the Israeli military. The Palestinian Authority in the West Bank is viewed by many as ineffective and corrupt. Furthermore, the ongoing violence has hardened attitudes on both sides, making the prospect of coexistence seem remote. Israel’s leadership remains committed to destroying Hamas. Likewise, Hamas leader Yahya Sinwar is reportedly “fatalistic after nearly a year of war in Gaza and is determined to see Israel embroiled in a wider regional conflict.”

The current situation can thus best be described as “Schrödinger’s Palestine”: the two-state solution is simultaneously dead and alive. On one hand, the reality on the ground has rendered the prospect of a viable Palestinian state almost impossible. Most actors, both in the region and internationally, no longer seem willing to invest in the diplomatic and political capital required to revive it. The ongoing conflict, hardened attitudes, and distrust on both sides have made the idea of coexistence seem increasingly illusory.

Yet, paradoxically, the concept of a Palestinian state remains more tangible in terms of international recognition than ever before. Over the past year, international sympathy for the Palestinian cause has surged, leading to greater advocacy for statehood. Several countries have moved to recognize Palestine diplomatically, and even traditional allies of Israel, particularly in Europe, have grown increasingly vocal about the need for a Palestinian state. The United Nations has also seen growing support for resolutions affirming Palestinian rights and the establishment of a state.